The EPF&MP Act, 1952 provided for a provident fund and a family pension scheme for employees from 1971 onwards. However it was felt that problems arising out of early death of the employee were left unaddressed. In view of this, the Act was amended to incorporate an insurance scheme, called the Employees' Deposit Linked Insurance Scheme (EDLIS) in 1976. The objective of the scheme was to put in place a mechanism to provide employees' families with income security after the death of the member. It was funded through contributions by the employer and the Central Government with no contribution by the employee himself. The scheme has undergone several changes since its introduction. The Government no longer contributes to the scheme and the rates of benefits have also been changed many times. The contributions thus come only from the employers. A comprehensive administrative framework was set-up to ensure smooth functioning of the scheme.

All employees to whom the Employee's Provident Fund and Miscellaneous Provision Act , 1952 applies, have a statutory liability to subscribe to Employee's Deposit Linked Insurance Scheme, 1976 to provide for the benefit of Life insurance to all their employees. Under the scheme as amended with effect from 24th June, 2000 the insurance benefit is equal to the average balance to the credit of the deceased employee in the Provident Fund during the last 12 months, provided that where such balance exceeds Rs.35, 000, insurance cover would be equal to Rs.35,000 plus 25% of the amount in excess of Rs.35,000 subject to a maximum of Rs.60,000. Thus if the length of service is not adequate and/ or the salary is low the average balance may be substantially less and such the benefit to the employee's family is either inadequate or non-existent. The contribution @ 0.50% of each employee's salary is payable by the Employer to the Provident Fund Authorities. The EPF&MP Act, 1952 provided for a provident fund and a family pension scheme for employees from 1971 onwards. However it was felt that problems arising out of early death of the employee were left unaddressed. In view of this, the Act was amended to incorporate an insurance scheme, called the Employees' Deposit Linked Insurance Scheme (EDLIS) in 1976. The objective of the scheme was to put in place a mechanism to provide employees' families with income security after the death of the member. It was funded through contributions by the employer and the Central Government with no contribution by the employee himself. The scheme has undergone several changes since its introduction. The Government no longer contributes to the scheme and the rates of benefits have also been changed many times. The contributions thus come only from the employers. A comprehensive administrative framework was set-up to ensure smooth functioning of the scheme.

Overview S-6-C of the Act empowers the Central Government, to frame a scheme to be called the Employees’ Deposit-linked Insurance Scheme for the purpose of providing life insurance benefits to the employees of any establishment or class of establishments to which this Act applies. After the framing of the Insurance Scheme, a Deposit linked insurance Fund, shall be established, into which contribution shall be paid by the employer from time to time in respect of every such employee in relation to whom he is the employer, such amount, not being more than 1 % of the aggregate of the basic wages ,dearness allowance and retaining amount for the time being payable in relation to such employee as the Central Government notified. The employer shall pay into the Insurance Fund such further sums of money, not exceeding 1/4th of the contribution, which he is required to make towards Deposit linked Insurance Fund.

The Insurance fund shall vest in the Central Board and be administered by it in such manner as may be specified in the Insurance Scheme. The Insurance Scheme may provide for all or any of the matters specified in Schedule IV .The Insurance Scheme may provide that any of its provisions shall take effect either prospectively or retrospectively on such date as may be specified in this behalf in that Scheme.

ApplicabilityEmployees’ Deposit linked insurance Fund Scheme is applicable to all the factories and establishments to which the EPF&MA Act, 1952 applies. This includes both the exempt and unexempt establishments covered by the Act. All employees who join the Employees' Provident Fund are covered by the EDLIS.

Operational Framework of the Employees’ Deposit linked insurance Fund Scheme· Contributions At the time of inception of EDLIS, contributions were made by both employer and the Central Government. The Act specified that the employer shall contribute not more than 1% of the aggregate of basic wages, dearness allowance including cash value of food concession and retaining allowance. In 1977 it was decided that the employer would contribute 0.5% of the above mentioned aggregate pay, subject to a ceiling of Rs.6500. The Central Government contributed 0.25% of the pay in respect of the covered employees. In 1996, an amendment was passed which ended the Government's contributions with respect to covered employees. The Government stopped contributing in 1998. The employers continued to contribute at the rate of 0.5% of pay. The time limit for the employer to remit his contributions to the Deposit-Linked Insurance Fund is within fifteen days of the close of every month. The Central Government must credit its contributions to the Fund as soon as possible after the close of every financial year. As of 2004-05, the total contributions received under the EDLI were Rs.191.62 crores.

· Benefits On the death of an employee who is a member of the Provident Fund, the selected nominee will get the existent accumulations in the PF account of the employee as well as an additional amount. This additional amount is equal to the average balance in the account of the deceased during the preceding twelve months or during the period of membership, whichever is less. Where the average balance exceeds Rs.35, 000 , the amount payable is Rs.35,000 plus 25% of the amount in excess of this figure. This total amount is subject to a ceiling of Rs.60,000. The lump sum is tax free.

· Investments Before 1997, the corpus of the Deposit-Linked Insurance Fund was deposited with the Central government in the public account. It earned an interest of 7.5% before 1989. In 1989 the interest rate was increased to 8.5%. After 1997, the corpus already in the Fund was left in the public account, and new contributions were invested according to a specified pattern described below.

Investment category

Percentage invested

Central Government Securities

Not less than 25%

State government securities and guaranteed securities

Not less than 25%

7-Year National Savings Certificates or Post Office Time Deposits

Not exceeding 30%

Special Deposits

Not exceeding 20%

The EDLIS portfolio stands at Rs.4375 crores as of 2004-05. The exposure of the EDLIS portfolio to various State Governments has been quite substantial.

· Administration The contributions towards administration and inspection charges have changed over the years through reforms. At the time of inception, the employer paid 0.1% while the Government contributed 0.05% of pay. In 1980 a proposal was passed which put in place inspection charges for employers of exempt establishments. This charge was 0.02% of pay. In 1988, administration charges were reduced from 0.1% to 0.01% for employers, and from 0.05% to 0.005% for the Government. These charges were then subject to a minimum of Rs.2 per month for the employer , and Rs.1 per month for the Government. The scheme is currently following this pattern of charges but the Government stopped contributing towards administration charges after 1998. As of the year 2000 employers of exempt establishments must pay inspection charges of 0.005% instead of the earlier 0.02%. These payments are deposited in the Insurance Fund Central Administration Account and are used to fund the expenditures involved in the running of the scheme. The EPFO collected Rs.8.66 crores on account of charges in 2004-05.

· Exemption Provisions for exemption from the EDLIS are listed under Section 17 of the EPF&MP Act 1952 along with Section 28(1) of EDLIS. An exemption from EDLIS is granted where the employees receive an insurance benefit without making any separate contribution or paying premium. It is necessary that this insurance benefit be greater than the insurance benefit provided under the EDLIS. An establishment exempted from the operation of the EDLIS is required to submit a monthly return to the RPFC. The establishment is also liable to pay inspection charges at the rate of 0.005% of the basic wages and dearness allowance, subject to a minimum of Re.1 per month. It does not have to pay any administration charges.

· Default Where an employer makes a default in the payment of any contribution or charges, the Central Provident Fund Commissioner may recover penalty from the employer at varying rates depending on the period of default. The penalty rates are as follows

Less than 2 months default period

17%

Between 2 to 4 months default period

22%

Between 4 to 6 months default period

27%

6 months and above default period

37%

These damages may be waived or reduced in certain cases. If the management changes, or there is a merger or amalgamation, the damages may be waived completely. If the Board for Industrial and Financial Reconstruction recommends a waiver, a waiver up to 100% may be granted. In other cases, depending on the merit of the claims for waiver, up to 50% of damages may be reduced. If an employer deducts or attempts to deduct contributions from the employees' remuneration, fails to submit a return, obstructs an official in the discharge of duty or fails to produce records for inspection, he is punishable with imprisonment up to one year, or a fine of up to Rs.4000, or both. In 2005, of a total of 14,748 prosecution cases, only 774 cases were disposed while the remaining 13,974 cases were still pending. The top five states as of 2004-05 in terms of prosecution cases lunched were Madhya Pradesh, Bihar, Maharashtra, Karnataka and Gujarat.

Advantages of Employees’ Deposit linked insurance Fund Scheme Advantages to the Employer: The premium payable by the employer is usually less than the total contribution being paid by the employer to R.P.F.C; particularly when the salary level is high and average age of the group is low. Settlement of claim is quicker, LIC requires only the death certificate and the Claim Form from the employer. Premium paid by the employer is treated as normal business expenses for Income-Tax purpose.

Advantage to the Employee: Each employee is covered for a sum assured ranging between 5,000 to 2,00,000 depending upon the current salary and service put in from day one irrespective of the actual balance in the Provident Fund. Alternatively every employee/ worker can be covered for a uniform sum assured which will be decided depending upon the group size.

Accident Benefit: Double accident benefit can be allowed to the extent of the Sum Assured for an extra Premium.

Steps to introduce the scheme: Put up notice for the knowledge of the employees that you are going in for LIC's Scheme in lieu of EDLI. Apply to the Regional Provident Fund Commissioner under Sec.17 (2A) of the E.P.F. and M.P. Act 1952 to exempt you from EDLI Scheme. The application should be accompanied by the prescribed requirements including the Rules of the Proposed Group Insurance scheme. Central PF Commissioner has authorized the R.P.F.C. to grant exemption from the 1st of the month in which the application for relaxation is submitted. LIC also offers necessary guidance to the employers for seeking relaxation.

Exemption from the Employees Deposit Linked Insurance Scheme, 1976Section 17 (2A) of the Act provides for grant of exemption from the operation of Employees Deposit Linked Insurance Scheme, 1976. It is granted to an establishment, where the employees are, without making any separate contribution or payment of premium, in enjoyment of benefits in the nature of Life Insurance whether linked to their deposits in Provident Fund or not and such benefits are more favorable than the benefits admissible under the Insurance Scheme. It is granted by the Central Provident Fund Commissioner by notification in the official gazette and is subject to conditions that may be specified in the notification. It is granted either prospectively or retrospectively.

Pending grant of exemption to an establishment relaxation order may be issued under Para – 28 (7) of the Employees Deposit Linked Insurance Scheme, 1976.

An establishment exempted from the operation of Employees’ Deposit Linked Insurance Scheme, 1976 is required to submit a monthly return to the Regional Provident Fund Commissioner by the 25th of the month in Form 7(IF).

Para 28 (4) of the Scheme provides for grant of exemption by the Central Provident Fund Commissioner to any Class of employees.

Under Section 17 (2B) read with Para – 28 (1) of the Employees’ Deposit Linked Insurance Scheme, 1976, the Regional Provident Fund Commissioner may grant exemption from the operation of all or any of the provisions of the Employees’ Deposit Linked Insurance Scheme to an employee.

The establishment shall pay inspection charges at the rate of 0.005 % of the basic wages and Dearness Allowance subject to a minimum of Rs.1/- per month.

Conclusion The Central Government while exercising the powers U/S 6C of the EPF and MP Act ,1952, enacted the Employees Deposit Linked Insurance Scheme in 1976 by GSR/488 ,dated 28th July 1976.This Scheme came into force w.e.f. 1st August ,1976.The purpose of the scheme is to provide life insurance benefits to employees ,who are already covered under Provident Fund /Pension Funds. The employer has to pay contribution equal to 0.5 % of the total wages of the employees. The employee does not contribute any amount to the scheme. The salary limit for average of employees is same as the Provident Fund.

Benefit to nominee of employee- If an employee dies during employment, his nominee or family member gets an amount equal to average balance in the Provident Fund Account of the deceased employee during last 12 months. If such balance is more than Rs.35000,the insurance amount payable is Rs.35000 plus 25% of the amount in excess of Rs. 35000 ,subject to overall limit of Rs. 60000( w.e.f. 13th June 2000). If the employees are covered under another life insurance scheme whose benefits are better than this scheme, an exemption from this scheme can be obtained. ******************************* # Available at http://www.iief.com/wiki/index.php/EDLIS visited on April 29,2010. # Available at http://lic-indian.blogspot.com/2011/04/group-scheme.html visited on April 24,2010. # Available at http://www.iief.com/wiki/index.php/EDLIS visited on April 23, 2010. # Available at http://www.iief.com/wiki/index.php/EDLIS visited on April 29,2010. # Available at http://www.iief.com/wiki/index.php/EDLIS visited on April 29,2010. # Available at http://www.scribd.com/doc/29210585/Pension-Plan visited on April 29,2010. # Available at www.iief.com/Research/edlis_15.10.04.pdf visited on April 29,2010. # Available at http://www.iief.com/wiki/index.php/EDLIS visited on April 28,2010. # 17. (1) Subject to the provisions of the Act and of this Scheme, the Insurance Fund, not including therein the Insurance Fund Central Administration Account, shall not, except with the previous sanction of the Central Board, be expended for any purpose other than the payment of the benefits in accordance with the provisions of this Scheme. (2) The Insurance Fund shall be operated upon by such officers as may be authorised in this behalf by the Central Board.

# 28. (1)(i) A Commissioner may by order and subject to such conditions as may be specified in the order exempt from the operation of all or any of the provisions of this Scheme an employee to whom the Scheme applies on receipt of application from such an employee: Provided that such an employee is without making any separate contribution or payment of premium, in enjoyment of benefits in the nature of life assurance, whether linked to their deposits in provident funds or not, according to the rules of the factory or other establishment and such benefits are more favourable than the benefits provided under this Scheme. (ii) Where an employee is exempted, as aforesaid, the employer shall in respect of such employee maintain such accounts, submit such returns, provide such facilities for inspection as the Commissioner may direct and pay such inspection charges and make such investments as the Central Government may direct. # Available at http://www.iief.com/wiki/index.php/EDLIS visited on April 29,2010. # Available at http://www.iief.com/wiki/index.php/EDLIS visited on April 29,2010. # S.D.Puri, The Employers Provident fund and Miscellaneous Provisions Act,1952,(Mumbai:Snow White Publication)2010 p.922